Facebook was experiencing one of its worst reputation crises in its history. The mistrust of regulators and users had skyrocketed after a former social network engineer , Frances Haugen, leaked internal documents to the press proving that the board was turning a blind eye to the avalanche of misinformation and harmful content for health. mentality that circulated on its platforms.
Mark Zuckerberg had a brilliant idea to put the scandal behind him. On October 28, 2021, the company was renamed Meta and pivoted its business towards the so-called metaverse , a new yet to be defined immersive digital environment that purports to be a 3D internet .
Facebook set the pace for the technology industry. The promise that the future of the network was through virtual reality (VR) seduced large companies from around the world, who began to spend billions of euros trying to achieve this dream born of science fiction . The underlying promise was to squeeze that parallel universe to get as much revenue as possible from the emerging virtual economy, enabled by the so-called Web3 ( cryptocurrencies , blockchain and NFT ). Silicon Valley ‘s siren songs attracted everything from telemarketers to large investment funds, haute couture firms and artists.
Metaverse falls, AI rises
However, a year and a half later, all that initial enthusiasm seems to have faded. Global investment in the metaverse has gone from raising about $2 billion in the first three months of 2022 to $586 million in the same period this year, according to data from the venture capital firm PitchBook compiled by Axios. “It is normal that what we have seen of the metaverse is quite poor and that its development is slow and expensive, since there are still no computational capacities to recreate very realistic virtual environments,” explains analyst Antonio Ortiz, who compares it to the beginnings of mobile technology .
Meta’s division dedicated to developing the metaverse lost $10.2 billion in 2021 and $13.7 billion in 2022
On the one hand, the fall in popularity of VR is due to the ‘hype’ created around AI , the new trend to which the sector has been delivered. While the integration of chatbots capable of simulating a human conversation is being deployed under the promise of immediately accelerating productivity —an advertising formula yet to be tested— investment in the metaverse does not point to an economic return until the medium or long term. . Reality Labs , Meta’s division dedicated to the development of VR and augmented reality (AR) products and services, posted operating losses 10.2 billion dollars in 2021 and 13.7 billion more last year. That led Meta shareholders to publicly denounce that strategy.
Cuts in the sector
The other factor that has diminished this field is the economic turbulence that the sector is going through, which so far in 2023 has already laid off more than 166,000 people worldwide, more than all of last year. After two decades of easy access to money, inflation has led many companies to downsize and invest.
Zuckerberg’s aforementioned letter was to announce a second round of 10,000 accelerated layoffs after Meta’s shares plunged 64.45% in 2022, leading to a 41% drop in its annual profits. If in February Microsoft eliminated its industrial metaverse division, at the end of March Disney did .
The metaverse has receded into the background, but it hasn’t disappeared. A recent global survey by consultancy KPMG found that 70% of CEOs of large companies will invest less than 5% in the metaverse this year, but 60% believe that when it matures, it will be a “thriving business ecosystem.”
Thus, the industry’s investment remains colossal. Thus, Meta plans to launch this year a new generation of headsets, an improvement to the Horizon Worlds platform and a renewed version of Quest , its VR glasses. And he will do it knowing that, this year, the “long-term” investment (between 10 or 15 years) will mean even higher losses.
It’s not the only one. Apple could launch to compete in that market in the coming months with a helmet on which it has been working for seven years. Nvidia , the seventh most valued company in the world, continues to bet on the construction of these spaces. Microsoft is the company that holds the most patents for metaverse-related technology , owns the popular virtual world Minecraft , and is trying to close the purchase of video game giant Activision Blizzard . ‘Gaming’ is the greatest current exponent of what the metaverse can be, which explains why companies like Epic Games —creator of Fortnite— o Unity and platforms like Roblox are among those that invest the most in this field. Others such as Samsung, Magic Leap, Adobe, Verizon, Intel, Snap, Baidu or LG also stand out in this race.
A study by the analytical firm IDC pointed out two weeks ago that the sale of VR glasses had deflated by 20.9% last year, but that between 2023 and 2027 it will skyrocket at a rate of 32% per year. “From text to audio and video, technology has always been more immersive,” says Ortiz. “I wouldn’t give the metaverse up for dead.”